The Human Side of Compliance™

SaaS | Cloud Computing Takes Document Imaging, Workflow, Audit Response and Risk Mitigation to New Levels

Written by:  Michael Binko, president and CEO, kloudtrack®

Much has been made in securities and insurance communities over the past few years about using technology to assist in transaction-based compliance monitoring.  From suitability and AML to best-price trading the technology community has rallied around tracking, tracing and logging securities transactions from virtually every angle. 

Nonetheless, during the same time-period both the volume of SEC/FINRA regulatory audits and the amounts of fines levied in enforcement actions consistently doubled year-over-year.   Similar compliance challenges are confronting stakeholders in Healthcare Reform, Government 2.0 and other industries where privacy and transparency must be balanced.

One might wonder, “How can this be?  If organizations are investing so heavily in scrutinizing financial transactions and medical records/payments where are compliance break-downs occurring?” 

The answer is elementally simple yet two-fold:  Documents and Humans!

 

  1. Documents:  The first challenging reality is that, no matter how automated and thorough transaction monitoring tools are, every piece of broker-dealer business is ultimately processed using some type of paper or electronic document/form.  This element of the industry is at once fundamental and profound.  While both paper-based and paperless systems can accomplish the same end results, firms struggle with providing options for employees that are consistent across both models.
  2. Humans:  The second and even more fundamental aspect of securities and insurance transactions is the fact that all pieces of business are finalized only with the direct involvement and activities of individuals – clients, reps/producers, registered principals, IT staff, operations, as well as legal and/or compliance team members, to name a few.  While typically well-trained and equally well-intentioned the simple fact is that this Human Side of Compliance™ is largely responsible for the majority of compliance, legal and risk management break-downs. 

 

The cross-section of these two tenets of securities/insurance business is precisely where the next level of operational efficiency, supervisory process and regulatory compliance is already being found by many firms – no matter the size.

 

Meet Me at the Crossroads

On the document side developments in scanning, imaging, optical-character recognition (OCR), data-mining, archiving and sophisticated search-and-retrieve have been the norm for quite some time. 

The Human Side of Compliance, however, is much more difficult.  Once a document (whether paper-based or electronic) is ready for processing the challenges of reviewing and approving the document take center stage.  In the securities and insurance world that involves very meticulous supervisory procedures and review processes.   Capturing information related to who is handling the document and keeping an audit trail of associated data and review/approval events is critical. 

While cumbersome to automate, systems that fuse document management and human workflow capabilities with other front and back-office systems are providing the best results

Enter Software-as-a-Service and Cloud Computing

The good news is that there are technologies available that tackle the challenges of structured document management while simultaneously mitigating the risks of the Human Side of Compliance – and these technologies are not cost-prohibitive or difficult to implement. 

For more than a decade now one technology concept has emerged as the most viable platform for addressing quick enterprise growth, the challenges of critical document management and the subtleties of human compliance.  This concept is often referred to as Software-as-a-Service or Cloud Computing (SaaS | Cloud).  

In SaaS | Cloud scenarios, the software is not purchased and installed on a company’s server; rather, SaaS | Cloud platforms are accessed through the Internet using encryption techniques and full audit-trail technologies.  SaaS | Cloud has been changing the software industry at fundamental levels offering benefits to small and medium-sized companies because the basic features include:

  • Simplicity & Mobility
  • Security & Recovery
  • Scalability & Predictable Costs

With SaaS-Cloud, capabilities once only available to the largest firms are now easily attainable for small firms as well as individual practitioners. 

Scalability & Predictable Costs
Predictable total cost of ownership (TCO) and return on investment (ROI) are also two critical components that make SaaS | Cloud a no-brainer for growth-minded firms.

To start, pricing models for SaaS | Cloud typically have low points of entry and only increase as a company ramps-up its use of the SaaS | Cloud application(s).  SaaS | Cloud offers better cost management because there is no need to schedule an onsite update of users’ computers each time there is a security or other software update.  With SaaS | Cloud applications edits to user profiles and upgrades to the applications are all completed automatically and remotely as a part of the service.  This alone can mean a reduction in IT expenses and can free up internal or third-party IT teams to concentrate on addressing other more strategic needs.

In addition, the true TCO and ROI benefits shine through with the simple fact that hard-costs of application server equipment and data center infrastructure are managed directly by the SaaS | Cloud provider and are not at risk if disaster strikes the place-of-business.

Kaulkin Information Systems (KIS) is pleased to have been one of the original SaaS | Cloud pioneers and is one of the few vendors that it has been delivering its kloudtrack® family of SaaS | Cloud application modules to broker-dealers and other financial services firms for nearly a decade.  

We look forward to working with you!

In the meantime, we invite operations, legal, compliance, IT and executive management team members from our broker-dealer community to take a look at the results of a 9-month ROI Benchmark Study (http://www.kistrack.com/roi/roi_case_study.pdf) that highlights hard-dollar savings realized during instances of actual FINRA/SEC audit scrutiny.

 

 

Mike Binko is President and CEO of Kaulkin Information Systems (KIS), a leading provider of secure, affordable document management, workflow, compliance and risk mitigation technologies and solutions services.  Mike can be reached at mbinko@kistrack.com, or at 240-499-3830.   KIS information is also available at www.kloudtrack.com.

On July 19, 2010, posted in: Recent Articles by
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